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You can't ignore every transaction that results in negative value because money is spent multiple times. Value was still lost. The future value that money creates doesn't negate the lost value because you have to assume the added value would still have been created.

That's not really how it works. Just because there is added value doesn't mean that the money cannot add further value. The only value lost to the economy is that which is saved or spent on imports and for every transaction there will be some loss.

So the 2007 recession wasn't caused by a huge devaluation of the housing market, it was because money flow slowed down. That's ridiculous. MV=PT is used to explain inflation, not economic growth. The two are related, but they are not the same thing.

The collapse of the housing market is a reduction in flow of money. When any bubble burst the velocity with which money moves and the number of transactions decrease as people are worried and unsure about the future and have a tendency to freeze investment and expenditure.

Also MV=PT is linked to economic growth as an increase in the Money Supply not matched by one in price level is economic growth.

So did the housing market collapse because of a reduction in the flow of money? No. It collapsed because houses were overvalued. The result was a reduction in the flow of money.

According to MV=PT, an increase in money supply not matched by one in price level has to be offset by a decrease in the velocity of circulation, an increase in the number of transactions or a mixture of the two. Your example explains deflation as well as it explains economic growth.

I think the other poster handles most of your concerns, but I'd point out that you are ignoring positive externalities of government spending e.g. food stamps, people like living in a country that feeds those with lesser means, particularly kids. This is why these programs exist, after all.